Research that is free to access for all investors. Companies commission these providers to write research about them.
Brokers who write research on their corporate clients and make it available through our main bundle offering.
Research that is paid for directly by asset managers. Only accessible to institutional investors permissioned for access.
Event in Progress:
View the latest research on other companies in the sector.
Dotdigital has announced a $35m acquisition and a broadly inline trading update. Using their strong balance sheet (£50m net cash pre deal) the company has acquired Social Snowball in the US, paying an EV/sales multiple of 4x, less if the earn out is achieved. The deal is earnings enhancing and should be EVA positive within 2 years, given the high growth and gross margin. They have also given a short trading update that is broadly in line for the year to June 2025, we cut our forecasts slightly for currency and a contract non-renewal. A further update will be provided at the end of July. In H1, Dotdigital reported 10% revenue growth but key competitors like Klaviyo and Braze are growing faster. Growth plus margin our main KPI is 24%, ranking only 9th in our coverage. The stock trades at 2.0x EV/Sales and 9.8x EV/EBIT, not demanding in our model, but there are better opportunities elsewhere and with our concerns on competition, we maintain our Hold rating and a 115p target price.
DotDigital Group PLC
Dotdigital’s share price has drifted in the last 12 months as it got its house in order following COVID while seeing its end-markets challenged. Today’s acquisition and update should provide further comfort. The shares trading on 6x CY25E EV/EBITDA and 9% FCF yield feels very unfair, in our view.
DOTD has announced the $35m (max consideration) acquisition of Social Snowball, a highly complementary business that helps e-commerce businesses convert prospects, customers, influencers and affiliates into commission-driven brand advocates. Social Snowball is currently available through existing DOTD e-commerce partner Shopify with over 1,500 monthly subscription-based customers, strengthening DOTD’s Shopify channel partner foothold and Customer Experience Data Platform (CXDP), and increasing DOTD’s TAM and potentially the ARPC. The acquisition is expected to be immediately earnings enhancing, after an initial cash payment of $20m, and ambitious growth targets would merit a further payment of $15m with >$18-20m run rate revenue after two years (Cav est., not modelled). Current run rate revenue is $5m and the acquired business has grown to be cash flow positive in calendar 1H25. Additionally, the DOTD year-end trading update reports (30th June year-end) performance in line with expectations, while noting the decision not to renew a low-margin transactional SMS contract, which reduces FY25E revenue by £0.7m and FY26E by £4.4m, with negligible gross margin/ adj EBITDA/ adj EBIT impact, and improving group margins throughout the P&L. We introduce FY27 forecasts to better illustrate the accumulated benefit of the acquisition. 150p target reiterated, with room for positive reappraisal at finals.
Dotdigital has achieved another very solid trading period delivering +8% ARR growth, +7% organic ccy. sales growth, while adj. net income grew +5% y/y to £7.9m. The latter equates to 53% of our unchanged FY25 estimate. Results have been accomplished thanks to a strong international performance and notwithstanding difficult UK trading conditions. However, we get the sense that this headwind is abating (or at least stabilising) such that DOTD is not only well positioned to meet FY25 numbers, but in combination with new growth initiatives and cost synergies, also well set against conservative FY26 forecasts. Despite what the share price suggests, DOTD is executing well and is strongly positioned to benefit from a market upturn.
1H25 interims to December are in line with the January trading update, demonstrating the high achievability of FY25 forecasts: revenue of £42.4m delivered 10% constant currency growth (9% reported), derived from the typical gamut of successful stats relating to the three strategic pillars. Additional functionality revenue grew 15%; strategic partner revenue grew 12.6%; and constant currency international growth of 20% (US) and 19% (APAC), added to 7% (EMEA incl UK), albeit there was some adverse FX movement. Average revenue per customer of £1,916 also described the benefit of the acquisition of Fresh Relevance in 1H24, attracting bigger clients and larger contract sizes, with the DOTD reach extending Fresh Relevance beyond its historic UK home territory. All these things we knew from the January trading update, and that’s the key – DOTD continues to make reliable progress with 95% recurring revenue (80% contracted), at high margins of 33% (adj EBITDA) and 22% (adj EBIT), with a cash balance of £45.7m available to deliver further technological roadmap acceleration through acquisition. Adjusting for year-end cash of £50.7mE, an EV-based free cash flow yield of 5.3% rises to 6.0% in FY26. Currently trading at ‘value’ multiples instead of ‘quality’, we reiterate our target price of 150p as DOTD delivers even in a tough environment.
Nothing is certain except for death, taxes and growth by Dotdigital. As the company has today announced yet another half year of uninterrupted growth, which leaves the company tracking in line with full-year estimates. Specifically, DOTD expects to deliver +10% ccy. sales growth to £42.4m, which equates to broadly +7% ccy organic (1H24: +11% y/y) so a slight decline, but still, several data points highlight continued strategic progress. For example, all geographies continued to grow (including +19% in APAC and +20% in N.America), while ARPC also progressed nicely: +12% to £1,916/month, reflecting continued progress with higher value customers and also strong CXPD demand, which now includes Fresh Relevance’s web personalisation capabilities. This top-performance, is consistent with full year expectations (+7% organic) such that we leave FY25e revs and profit unchanged, such that we continue to forecast +12% EBITDA growth, driven by the aforementioned organic and also expected margin improvement by Fresh Relevance. DOTD trades on just 16x FY26 PE or a 5.6% FCF yield that’s pretty undemanding for one of the most resilient businesses in our sector.
The interim TU to December reports revenue growth of 9% (10% on a constant currency basis) compared with our 9% full-year forecasts, in line with unchanged full-year expectations; adj EBITDA and adj PBT (undisclosed) are also as expected. 1H25 revenue of £42.4m, 95% recurring (December 2024: 94%) contributed 49% of the FY25 forecast, in line with FY23 and FY24, reiterating the visibility and earnings quality. The strategic pillars continued to support growth, notably with strategic partnerships’ revenue growing 13% (FY24: 8%), revenue from additional functionality growing 15.5% to £15.2m, and growth in all territories. Average revenue per customer grew 12% (1H24: 9%), also ahead of group revenue growth, which suggests growing average customer size and/or strong net revenue retention. The group continues to deliver solid operating results in a tough martech environment, adding £3.6m (1H24: £3.4m) free cash flow in the typical 2H-weighted DOTD cash generation cycle. Substantial progress on the product roadmap, including TikTok and LinkedIn integrations, and trials with WhatsApp, show DOTD’s continuing relevance and response to evolving market demand. Management continues to capably deliver the steady profitable growth that investors demand. Trading below our Cavendish Tech 40 EV/EBIT, DOTD is showing the steady growth and cash generation to hit full-year expectations and continue to please, yet without recognition in the share price – the opportunity awaits. Target price 150p, where the group continues to deliver revenue growth of 9% and Adj EBIT margin of 20%, leading to earnings predictability and strength; and a £45.7m cash pile rising to £50.7m by year end (16.2p per share), from which M&A is surely an inevitable consequence.
Currently trading on a CY25E PE of 18x, we think it is wise for investors to remain cautious in the short-term given the weak corporate spending environment and the lack of clear guidance for FY25. For FY25E, we trim our PBT by 1% to reflect a 1pp cut to revenue growth for that year. We maintain our TP of 110p and Add recommendation.
Dotdigital released its full year results confirming the detailed trading update from July, and a pretty decent performance overall in FY24, with organic revenue growth of 7% and EBITDA growth of 10%. The outlook remains positive, but we make no material changes to our estimates. The shares trade on EV/sales of 3x and EV/EBIT of 14.7x- whilst this rating is not particularly demanding we remain concerned about the mid to long term market position of Dotdigital. There are several much larger players who are growing much faster. The shares have remained in a tight trading range and we believe there are a better opportunities elsewhere in the sector using the “Growth plus margin KPI”. We retain a Hold rating and 115p target price.
Finals to June 2024 have delivered results pleasantly ahead of the July trading update and unchanged FY24 & FY25E revenue, EBITDA and cash flow expectations after having delivered small uplifts to profit forecasts at interims. With revenue of £79m (a pleasant 1% ahead of pre-TU expectations), adj EBITDA 3% ahead, adj EBIT +1% and PBT +3%, cash reported was 22% of pre trading update expectations, at £42.2m, yielding a consistent £11.5m FCF (FY23: £11.68m). Revenue growth of 14% (vs 14%E) included 9% constant currency organic growth, equivalent to 7% reported growth vs 6% expected, with organic revenue of £74.3m vs £73.5mE. Fresh Relevance, acquired in September 2023, delivered revenue of £4.7m vs £5.0mE for the 9 months since acquisition. 94% recurring revenue (including 79%, contracted revenue, and ARR growing at 13%) and 15% expansion to £1,861 average revenue per customer per month, highlights the opportunity in the three strategic pillars – selling more products to more customers through more channels in more territories. International revenue growth strength continued (APAC +27% and North America +16%, at constant currencies); additional functionality revenue grew 27% to £31.6m; and strategic partner revenue grew 9%. Forecasts for FY25 are materially unchanged, and we reiterate deliverable forecasts with upside potential from the levers of growth or margins (to regain the rule of 40 which the group routinely delivers), and free cash flow of c£12m. Alongside the introduction of FY26 forecasts, we reiterate our 150p target price, with an expected £50.7m unencumbered cash expected at June FY25, giving significant capacity to invest, to acquire, or to improve the dividend.
Results are very solid, as despite less than ideal trading conditions, DOTD has delivered robust growth: sales +9% ccy. organic, while also executed on its strategic priorities - through product innovation, geographic expansion and end-market diversification. Initiatives, which we believe, will pay long-term dividends (and indeed are already driving value). As such, while growth has not yet recovered to pre-Covid levels, arguably DOTD is in better shape today. It wouldn’t take much for metrics to tick up and in turn, for sentiment (and valuation) to materially change.
As per a full-year update, DOTD expects to achieve +9% cc. organic growth to £79.0m in FYJun24 (split +11%/+7% H1/H2) in line with expectations (£78.7mE) and also consistent with FY23’s +10% growth. While a pleasing outcome, this doesn’t fully reflect how DOTD has broadened its value proposition to become a more strategic/end-to-end martech vendor, while also increasingly serve the larger end of the SMB market and internationally so. This progress is however captured through +15% organic ARPC growth, in turn driven by more valuable new business. For instance, in EMEA ‘average contract values’ grew 58%. We suspect that this would have had a greater bearing on the full-year out-turn, had it not been for higher churn by smaller customers, due to macro pressures. No specifics are given on EBITDA/adj PBT though both are in line, meanwhile cash is slightly a/h, at £42.2m (vs. £41.2mE) implying £11.5m FCF. The outlook statement reads positively, as DOTD reiterates its progress, vision and its proven growth drivers and so we leave FY25 forecast unchanged (looking for +6% organic growth). We continue to see the stock’s risk/rewards positively, seeing how the top-line should improve as DOTD’s strategy bears fruit. Meanwhile, FCF margins should ultimately benefit from scale margins and M&A also remains firmly on the radar.
Dotdigital has confirmed the solid performance announced in the January trading update, with H1 revenues at £38.7m up 15% on a reported basis, 11% organic. Adj EBITDA was up 13% at £12.4m. This makes H1 a slightly higher percentage of FY24 than we saw in FY23, which might suggest some small upward pressure on forecasts. After the acquisition of Fresh Relevance (in Sept, £18.8m cash) net cash was £37.1m. Growth plus margin remains healthy in comparison to many UK peers at 33%. However, we have increased concern over the midterm competitive landscape, and while the shares are not expensive on our model, we need a higher margin of safety and downgrade to Hold. After the detailed trading update in January there is little news about the revenue line - we commend the company for the specific details given in its trading updates. Adj EBITDA was a bit higher as a percentage of FY24 than it was in FY23, and interest income is a small upside to market forecasts, we believe. We are slightly above consensus on profits. Recurring revenues remain high at 94% vs 95%. Geographically EMEA grew 9%, N America grew 8% and APAC was the strongest growing at 33%. Gross margin was 79.3% in line with the prior year at 79.1%. Market share, as readers will know, is an important KPI for us. We estimate that Dotdigital is holding share currently. CDXP (Customer Experience and Data Platform) is a very competitive space. Dotdigital estimate the overall market size is $6.5bn (SAM is $4bn), growing at 10%. This gives them a 1.5% share of overall market, 2.5% of SAM. One of the few IPOs in 2023 was Klaviyo (current market cap $7bn), one of their bigger competitors, and they are growing well over 20%. Klaviyo has a much lower ARPC and has a very close relationship with Shopify. Braze Inc, a $5.6bn market cap business is another competitor (IPO November 2021) is also growing much faster, they have a much higher ARPC. Elsewhere Intuit bought Mailchimp. emarsys was acquired by SAP. Adobe Marketing Cloud, Salesforce Marketing Cloud, Oracle Marketing Cloud, are all players. Dotdigital is investing in enhancing its product offering. This includes enhancing their AI capabilities, more personalization and omni-channel functionality. AI will be a big driver of improved efficiency and better ROI. WinstonAI is Dotdigital’s marketing intelligence engine. Overall there are several significantly larger players growing much faster than DOTD and this will increase the competitive pressure on them. We make no changes to any of our estimates at this stage. While the shares are not expensive on our model, we believe the risks are increasing and there is not enough margin of safety to have a higher conviction call. Whilst we acknowledge the M&A potential, we downgrade to Hold. We have much higher conviction elsewhere.
Trading at the start of 2H24 has been tracking in line with market expectations for the full year, hence no change to guidance. We were sitting at the bottom end of the range for EPS. Taking into account the higher interest income and a lower share count than we had in the model previously, we are upgrading FY24E adjusted EPS 5%. Whilst a strong performance, the numbers are in line with expectations at this stage. Given its c.22x CY24E PE, we reiterate our target price of 110p, but downgrade from Buy to Add.
DOTD’s interims are in line with expectations with a mild 3% upgrade to adj PBT and adj EPS from higher interest income. Revenue delivery echoes the January trading update, demonstrating the successful combination of organic and acquired growth, with 15% group revenue growth (vs 13% FY target) in the six months to December 2023. Organic revenue growth of 11% (at constant currency: 9% reported) was boosted by the contribution from Fresh Relevance, acquired in September, adding c£1.9m revenue (Cavendish estimate) in the three months to 1H24 and expected to add c£3.1m in 2H24, leaving about £1m (c3%) organic revenue growth required in 2H24, (compared with 2H23). Gross margin was consistent at 79%, with adj EBIT margin at a healthy 22% (1H23 22%, 2H23 20%). Net cash was £37.1m, even after the £18.9m cash element of the £25m Fresh Relevance acquisition, and management remains keen on further M&A to broaden the reach and appeal of the product set. Forecasts are unchanged and we look forward to the continuing development of the international growth opportunity, which adds to the outperformance potential. Target 150p reiterated, with a reminder that DOTD is one of the Cavendish top picks for 2024.
H1 revs are consistent with Jan’s update: +15% y/y to £38.7m, reflecting improved organic growth (+11% y/y) as all geographies grew, while DOTD also saw a maiden contribution from Fresh Relevance (‘Fresh’). Meanwhile - new today - adj. PBT performed better still: +16% y/y to £8.9m, as ‘core DOTD’ margins grew. This combination of strong operational execution, product improvement/enhancements (achieved through Fresh & organically) and margin improvement, all provide significant optimism, both for the short and medium term.
H1 results are in line with figures pre-announced in January and full year expectations, demonstrating sustained double-digit growth in H1. Should positive momentum be maintained, we continue to see scope for upside to forecasts and higher growth than we forecast over the medium-term. Dotdigital ha
Dotdigital achieved organic constant currency growth in H1 of 11%, building on the return to double-digit growth through H2 FY23. We believe this is the result of efforts to broaden the platform's capabilities, allowing greater success in winning higher value customers. Should this trend continue i
+11% cc. organic H1 growth represents a meaningful improvement on the comp. (c.+7%) driven by growth in all regions and also DOTD’s broader product portfolio, which now includes a CXDP, with personalisation capabilities (thanks to Fresh Relevance). This deeper/broader offering is key to continued cross-selling, while also should enable the pursuance of larger new customers. Success in these regards is reflected by a further 8% growth in ARPC in H1. At a Group level, sales grew +15% to £38.7m, post a part-period contribution from Fresh Relevance, so leaves DOTD tracking comfortably in line with FYJun24 cons. estimates. Similarly, H1 adj. PBT is also said to be in line. Looking further ahead still, we see upward pressure to FY25 cons. (+6% organic growth assumed growth), however it is not clear the market has priced this in, given the stock trades on a >5% FY25 FCF yield, assuming continued low double-digit growth. This looks anomalous for a business with DOTD’s quality and improving fundamentals.
94% recurring revenues, 10%+ growth, and a 30%+ EBITDA margin give DOTD an extremely solid base. Future growth is dependent on landing/expanding with higher ARPC clients. We believe that Dot, as it has done with tools like GenAI and a single customer view, must continue to augment its current offering (R&D or M&A) to expand its moat against rivals. We reiterate our Buy rating and 110p TP.
Finals to June 2023 detail performance in line with expectations, but outperforming by +6% for adj PBT and adj dil. EPS: revenue of £69.2m (£69.1mE); adj EBITDA of £22.0m (£22.3mE); adj EBIT £14.3mE (£14.3m); adj. PBT of £15.4m; (vs £14.5mE with the benefit of interest); and adj dil EPS also +6%. £52.7m cash at 30th June enabled the £25m September acquisition (incl £18.9m cash consideration) of personalisation functionality provider Fresh Relevance, in line with the acquisition strategy and accelerating the technology roadmap by 3-4 years. Finals reveal a plan coming together: targeted acquisitions; robust performance in the mature EMEA markets; opportunity in APAC (particularly Japan); and stability with a view to growth in the US. The concept of DOTD is familiar to us all: we appreciate the focused marketing made relevant by the appropriate segmentation and personalisation of DOTD’s Customer Engagement Platform for existing customers, and now with Fresh Relevance, also for anonymous customers. The strategic pillars for growth continue to help us understand the defined growth ambitions: territorial expansion; product development; and strategic partners, all of which are moving positively, lifting monthly from £1,461 at FY22 to £1,622 at FY23. We tweak FY24 and FY25 forecasts up with the benefit of improved interest expectations offsetting increased levels of amortisation of capitalised R&D (and of capex in cashflow) and lifting adj dil EPS +3% and +4%; and FCF +3% and +7%. TP 150p reiterated, with the current share price offering a generous 3.8% FCF yield at a P/E ex cash of only 15.6x, despite 13% forecast revenue growth and 94% recurring revenue.
Judging by the share price and valuation (>5% FCF yield) you might think DOTD hasn’t refound its mojo, however actually the picture is far more positive: FY22 growth: +8% y/y (vs. a record comp.) and then +10% in FY23 (despite a tough backdrop). We think this trend further improves looking ahead following a step-change in DOTD’s product portfolio, thanks to organic and acquired investment, as this is driving upsells, traction with larger customers and also is reducing churn. Furthermore, numbers don’t yet reflect the benefit of pricing initiatives. All this makes us think DOTD continues to be well set, both for the near and long-term.
We upgrade FY24/25E revenue 7%/9% and adjusted EBITDA 1%/4%, due to timing and integration costs. Whether to buy or build often comes down to speed to market and ROI. Here, it increases the TAM, but more importantly could substantially increase ARPU quickly for relevant clients.
A complementary acquisition providing potential for expansion of Dotdigital's TAM and ARPU, alongside increased competitive differentiation.
Today Dotdigital has taken significant strides in advancing its personalisation capabilities by acquiring Fresh Relevance - an established leader in this field, for £25m. What’s more Fresh Relevance also increases DOTD’s Group’s addressable market by offering personalised web design, such that the enlarged Group can now deliver consistent and compelling cross-channel experiences, across all stages of a customer journey. We therefore see how this acquisition both accelerates growth prospects and also solidifies DOTD’s market position, as it seeks to become the go-to Customer Experience Data Platform for online marketers. Largely being cash financed, this deal is modestly earnings accretive and even post financing DOTD will still have £38.3m of fresh powder - giving the flexibility to potentially finance further opportunities.
Dotdigital has acquired Fresh Relevance, a vendor of SaaS-based “cross-channel personalisation technology”, meaning that the acquisition personalises customer experiences across the web, email, mobile app, SMS and ads, to drive retention and conversion. The £25m acquisition (£6.1m equity at 88.7p and £18.9m cash, 12m lock-in, no earn out) accelerates DOTD’s Customer Experience Data Platform (CXDP) tech roadmap: having been a DOTD partner for 5 years, Fresh Relevance is a low tech-risk acquisition that can deliver higher ARPC, and retention, providing extra functionality into the customer base. With guidance of £6.0m current run rate revenue (£5.6m recurring), we lift forecasts: FY24, +7% revenue and EBITDA unchanged after some additional integration costs; and FY25 +9% and +5%. The Fresh Relevance CEO joins the Dotdigital leadership team. Having accumulated £52.7m cash, equivalent to 17.3p per share, the DOTD board has deployed the balance sheet and still retains net cash of £38.3m, rising to £40m at FY24; accelerated the CXDP roadmap without the need for the longer process of internal R&D; and bought a business in a fashionable subsector at an EV/Sales on current run rate of c4.2x, and set to become cheaper as the acquisition gains the benefit of the mutual revenue synergies. TP 150p reiterated, with plenty of capacity to repeat the positive exercise with one or even two more transactions deliverable from a strong balance sheet and a healthy free cash flow.
Dotdigital’s FY’23e update reveals revenues ahead of expectations (+10% y/y to £69.1m; SCMe: £67.5m), with AOP in line. Recurring revenue growth reaccelerated into double-digits in line with projections, although was boosted further by modestly higher transactional revenues. Growth has been delivered against the backdrop of rebuilding a US team in a tight labour market, consumer spend uncertainty and restricted customer budgets, and has been underpinned by the launch of AI/ML infused enhancements to the Group’s CXDP (ARPC: +11% y/y to £1,622/month). DOTD is moving up the value chain, enabling targeting of larger Enterprises looking for more cost-effective, yet still feature rich platforms. We make no changes to FY’24e revenue and AOP forecasts, and introduce FY’25e numbers. We project 7% 2-year revenue and Adj EBITDA CAGR, leading to FY’25e EBITDA of £25.5m and FCF of £12.5m. EV/Cal’24e EBITDA of 12x does not fully reflect growth potential in our view; we roll forward our 12-month price target, raising it to 120p/share (17x EV/cal’24e EBITDA; FCF yield: 3.3%).
Positive progress in H2 confirms the direction of travel indicated at interims in March. Dotdigital saw growth across all regions, including in the US where investment in the sales team has helped convert the growing pipeline signalled in H1. We retain our ADD recommendation and 110p target price.
Solid progress through the year. Its US investment is growing its pipeline and accelerating sales, and its Japanese investment is bearing fruit. With the recent GenAI (GPT-3.5) enhancements to its platform, which help with marketing campaign creation, Dotdigital’s attractiveness grows.
The highlight of todays interims is the bounce back in International revenues to a record £11.5m, this being yoy growth of 19% (assisted by FX) and evidence of the success of measures taken to rebuild the team after a period of elevated attrition in a very hot labour market. Growth in the UK has continued at a more measured mid-single digit pace, a symptom of more challenging macro conditions, which should in due course return to trend growth of c. 10% in our opinion. Dotdigital talks of a growing new business pipeline, increasing commercial momentum and an improving labour market with FYJun23 expected in line. There is also further mention of M&A. While not completely out of the macro woods, we think the worst is behind DOTD. Trading on FY24 UFCF yield of 4.7%, we continue to see upside.
DOTD has delivered interims to December in line with unchanged expectations, including revenue growth of 9.4% vs unchanged FY expectations of 7.4%. The group is delivering an EBITDA margin of 33%, and a prospective FY FCF yield of 3.9%, with £49.6m cash. DOTD operates as if 2 profiles of business: the mature, higher operating margin, lower growth EMEA business; and the higher growth, lower margin APAC and North American businesses. Disruption caused by staff changes in the higher growth regions in FY21 and FY22 has now passed, and the cost base (temporarily flattered in the comparable period of 1H22, lifting group EBITDA margin to 40% at the time) has stabilised along with the deployment of staff to restore strong growth. With the building blocks back in place, and confidence restored, DOTD offers an attractive profitable and cash generative model with 95% recurring revenue, as well as an enticing opportunity for stronger growth and margin expansion from the focus on additional functionality revenue, territorial growth, and strategic partners. Target 150p reiterated, with organic opportunities likely to benefit from M&A with the new chairman & CFO in place (2H22), adding further energy to the board.
H1 performance was solid, with revenue growth of 9% in line with the trading update in January. Management is confident in meeting expectations for the full year, with good momentum into H2. With increased confidence in the outlook, we move to an ADD rating (from HOLD) and increase our target price
dotdigital is happy with progress: it has steadied its ship and has line of sight to accelerating growth over the mid-term. M&A is now back on the agenda to enhance the offering and create a platform suitable for more use cases, in more verticals, and at higher ARPUs from more valuable clients.
Global growth – Near double-digit revenue growth was driven by encouraging NA progress, higher value deals in EMEA and APAC’s rapid expansion. Despite a fall in global advertisement spending, within that digital marketing spend remains on the up and we expect Dot’s impressive performance to continue. Buy.
Dotdigital expects to report revenue growth of 9% in H1, with revenue and adj PBT trending in line with expectations for the full year. The positive momentum detailed at results in November has continued into H2, with progress across all key regions. However, at 21x CY23 P/E, we see the current val
H1 numbers convince us that cons. numbers are likely to get gently nudged up over the coming 12 months. H1 revs growth of 9% compares to cons. FYJun23 forecasts of 8%. H1 adj. PBT is tracking in line at present but FCF looks ahead. DOTD expresses confidence in H2 demand and strategic direction. We suspect H222 was the nadir. Buy. PT 115p.
dotdigital had a challenging FY22A, with investment at some of its peers (including those under PE) stifling its potential growth. However, that has started to ease with some reducing staff and some coming back to dotdigital. But this does not give us confidence to make changes to our numbers yet.
Dotdigital has reported results for the year to June that are in line with the July trading update. Organic revenue growth was 8% to £62.8m. Adj. EBITDA grew 10% to £21.7m. Net cash is strong at £43.9m. DOTD saw growth across all global regions. DOTD is developing deeper and broader partner engagement. The Shopify relationship continues to strengthen, with Shopify customers growing 56%. BigCommerce, a global partner, saw a 67% increase in revenue from BigCommerce-connected customers. Current trading is tracking in line with expectations for revenue growth, with profitability marginally ahead. The fallout in VC-backed start-ups has helped the competitive landscape here. We retain our Buy recommendation and 115p Target Price.
Finals for the year to June 2022 are in line with the July trading update, which had described EBITDA and PBT “comfortably ahead” of consensus expectations. Accordingly, the group has delivered £62.8m revenue as expected, adj. EBITDA of £21.9m (+6% vs £20.6mE) and adj EBIT of £14.5m (+7% vs £13.6mE), leading to free cash flow of £14.2m, a 5.6% free cash flow yield at the current price. Combining revenue growth of 8% and the EBITDA margin of 35%, the group maintains the rule of 40 discipline (sales growth + EBITDA margin) it has consistently achieved since we initiated coverage in 2013, and prior. Net cash of £43.9m offers the refreshed board (new Chair and CFO) the opportunity to invest or acquire, to further accelerate growth. The “three pillars” for organic growth continue to light the way to driving growth through more channels and partners, in more territories, upselling increasing functionality. Returns on investment in marketing come under the harshest review when macro-economic concerns challenge discretionary spend, but customer communication for multi-channel retail, and CRM, is not discretionary. DOTD’s Engagement Platform provably drives sales with impressive ROI across multiple case studies. The challenges we identified at interims have been dealt with, particularly the senior hires in the US and vacancies on the group Board, and the group can now look ahead confidently once more.
FY22 revenue growth of 8% was in line with preannounced figures from the July trading update. As previously guided, profitability benefited from higher email volumes with adj EBITDA growth of 9% to £21.7m. The group continues to progress in establishing the US sales team, where customer wins and gr
FY22A: continued growth and increasing headcount Revenue was up 8% to £62.8m, in line with the trading update, driven by higher average revenues per customer with wins from Enterprise customers over-indexing as its investment in CDXP pays off. Adj. EBITDA grew 9% to £21.7m, with the margin increasing as the mix tilted towards emails and away from lower margin SMS. This filters down into adjusted operating profit, up 6% to £14.5m. Importantly, in 4Q22 the firm addressed staffing issues in the North America region and is seeing orders increase, though the Saas nature of the business will generate a time-lag for these to impact revenue. With the new year starting off well, we make no changes to numbers. James.Lockyer@peelhunt.com, Damindu.Jayaweera@peelhunt.com
After a profit warning at the interims results in March, and following a weak trading update in January, Dotdigital has announced a positive trading update for the full year to June after a strong H2, and particularly Q4. Revenues are at the top of the range given at the interims and Adj EBITDA and Adj operating profit are expected to be ahead of market expectations. Cash was particularly strong with a closing cash balance of £43.9m. While we are not changing numbers at this stage, not cutting feels like an upgrade. With increased confidence in the numbers, the combination of high single digit growth and EBIT margins in low 20%s, Dotdigital scores well in the PG Software Valuation model. We retain BUY and TP of 115p.
Improving confidence
Strong 4Q22 continuing into 1Q23 dotdigital is in a stronger position than six months ago, with a lot of work gone into ensuring the US is ready for FY23E. It ended FY22 at the top end of revenue guidance, with PBT ahead of consensus. As a result, we upgrade PBT 4%. The market has seen a strong de-rating lately, perhaps over punishing those investing to expand their TAM and widen their competitive advantage. Against a highly correlated 50 peers, dotdigital trades at a c.38% discount to the trend line. As a result, whilst we cut our TP from 150p to 110p to close that gap, we upgrade to from Add to Buy, expecting confidence to grow through FY23E. James.Lockyer@peelhunt.com, Damindu.Jayaweera@peelhunt.com 2-page note
Meeting Notes - Mar 04 2022
DOTD SDR PAGE TW/ TCAP ENT CKN
With wage inflation and the decline in SMS growth continuing into H2, Dotdigital has revised FY22 growth guidance to c.7-8% at an operating margin of 20-22%. We downgrade our adj EPS by 10% in FY22 and 19% in FY23 and FY24. Even at the lower share price, we see a number of risks to the investment c
Following on from the 27 January half-year trading statement where the shares got hit as the market thought H1 was light vs FY expectations (which they implicitly reiterated), Dotdigital today announced interim results where it has lowered FY expectations. The reason for the change in guidance since 27 January is that January was a bad month (post lockdown easing) and it has had some churn in the US. The new guidance of 7-8% growth for 2022 would suggest H2-on-H2 growth of only 4.5%. We have lowered our target price to 115p to reflect the lower revenues and more importantly lower growth rates, but retain our BUY rating as we see value in the company and note the levels of M&A in the space.
1H22A: in line, but outlook softened Revenue was up 10% to £31m, as per the January update, driven by higher sales from both new and existing customers. Adjusted EBITDA grew 17% to £12.2m, and adjusted operating profit 17% to £8.9m. But the new news is that hiring has seen more heads in the building, and wage pressure on recruitment and retention. Alongside the annualisation of lower US growth, the outlook has softened, with revenue growth slower than previous expectations in current and future years. This implies 5%/4% cuts to revenue/operating profit this year, and c.10%/15% in FY23/24E. We reduce our TP from 150p to 170p accordingly. James.Lockyer@peelhunt.com, Damindu.Jayaweera@peelhunt.com, Oyvind.Bjerke@peelhunt.com
Interim performance for the six months to December 2021 is in line with the January trading update, indicating 10% revenue growth to £30.9m and strong cash generation. The variability in performance in International territories had led to growth of 27% in APAC, 10% in EMEA, but only 3% in the Americas, a weakness based on competitive pressure and staffing challenges. With greater visibility from interims including the effect of the higher comparable of SMS usage in the prior year, we now review forecasts: we adjust FY22 and FY23 revenue -3% and -10% respectively; EBITDA unchanged; adj EBIT -4% and -7%; and adj dil EPS --8% in both years. Challenging circumstances have led to lower growth, after which, compounded by market conditions and lower multiples, we reduce our target price to 150p; multiples on acquisition remain much more rewarding than operational multiples on-market. Alternative KPIs remain strong: revenue from additional functionality and partner relationships show their typical path of improvement. With such a healthy balance sheet (£40m net cash), the opportunity exists to invest in staff retention, accelerate targeted marketing spend; or to embark on acquisitions; or, least likely, return some cash (with an improved dividend), as cash builds up from the cash generative model in absence of an acquisition since 2017. With the departures of the CFO and Chairman, the group is in a state of flux and we look forward to the return of momentum and certainty.
1H22E: model update after trading statement We upgrade dotdigital to Add after the recent weakness. Over the medium-to-long term, it is aiming for 10-15% growth, a 20-25% operating margin, and 95% net operating cash conversion. However, this is a baseline guide and any operational gearing above that range will be ploughed back in. We base our DCF on this. Our FY22E EPS remains unchanged but we use new UK tax rates in FY23E. As a result, our EPS reduces by 6% and we introduce FY24E with EPS growth of 8%. Updating our DCF, we reduce our TP from 242p to 170p, but upgrade to Add on the recent sell-off, de-rating the stock from its highs. James.Lockyer@peelhunt.com, Damindu.Jayaweera@peelhunt.com, Oyvind.Bjerke@peelhunt.com 3-page note
H1 trading was in line, with revenue growth of c.10% to £30.9m. Full year performance is expected in line with consensus estimates and we leave forecasts unchanged. We continue to like the opportunity from increasing customer adoption of the Engagement Cloud's functionality backed by the trend to o
With H1 revenues up 10% yoy, DOTD expects FY22 revenues, adj. EBITDA/PBT to be in line with cons, despite cost/hiring pressures in the labour market. We make no changes to our forecasts. After stellar group organic growth of 23% in FY21, heavily driven by SMS uptake, guidance was for a moderation this year and DOTD confirms that SMS volumes are more normalised. We had attributed a good deal of the moderation to SMS, though DOTD today flags labour market tightness has also impacted H1 growth. H1 Intl revs grew 4% yoy and Americas 3%. DOTD cites a challenging labour market with high levels of wage inflation and notes “the recruitment of talent and expanding the employee base is key to improving growth rates” and that it is confident of mgt. actions being taken to support growth in H2 and beyond. As we are seeing elsewhere, shortages are impacting even the best of companies, a camp in which the group firmly sits. We reiterate our Buy recommendation and 220p price target.
Meeting Notes - Nov 18 2021
DOTD CURY OXIG FSTA ELM SGE LMP HSV ERM BIFF MCRO CBG PRSM GPE KGF WINA
DotDigital is well-positioned in a growing market backed by tailwinds of increasing automation and digital adoption. It has an attractive growth profile with high recurring revenues and cash generation. While profitability has seen some decline due to revenue mix and investment, we believe the busi
Finals to June 2021 are in line with the July TU, detailing the very strong performance which had led to upgraded expectations (+5% EBITDA, +7% adj PBT & adj dil EPS), and which are politely exceeded, with EBITDA ahead a further 3% and adj dil EPS +5%. Reinforcement of the strong balance sheet led to £32m y/e cash (no debt) after £8.8m free cash flow. The three strategic pillars each contributed, delivering increased ARPC +16%, from larger numbers of customers, 22% international revenue growth, through more channels and from more product modules. The revenue mix included strong growth in SMS, giving increased revenue opportunities and attractiveness of the platform to existing and potential customers, albeit with a mildly dilutive effect on gross margin, already catered for in forecasts. The market is consolidating: communications platforms (Sinch, Twilio) have bolstered their platforms with email functionality, while DOTD marches towards them accumulating omni-channel capabilities. With a sustainable premium rating driven by 23% revenue growth and a 34% EBITDA margin in FY21, we lift our target price to 275p, rolling forward the current FY21 EV/sales multiple to apply it to FY22.
Success with the widened omni-channel Engagement Cloud proposition, alongside booming ecommerce and marketing automation markets, has driven record results for dotdigital in YJun21. Organic revenue growth of 23% is the strongest since 2016. The company continues to enhance its proposition to provide one of the highest ROI solutions for the digital world, with enhanced functionality to complement the core messaging product seeing growth of 31%in the period and now representing 31% of group revenues. We make no changes to forecasts at present but recognise the significant growth avenues ahead in international markets, with cutting edge emerging technologies and fast growing B2B partners.
FY21: Strong year, c.5% upgrade to PBT Dotdigital has performed well, revenue up c.23% (c.2% beat to consensus); PBT is “comfortably ahead of market expectations”. The c.55% equity performance YTD has it re-rated closer to SaaS, helped by M&A in the sector. The plan is to continue to lean into investment in EMEA/APAC as well as functionality. Hence we leave our FY22/23E estimates unchanged, leaving ourselves c.5% ahead of consensus on average. Mindful that the equity performance was driven by rerating, we increase our target price to 242p but downgrade from Add to Hold. However, if it continues as it does, this rerating may continue upwards. James.Lockyer@peelhunt.com, Damindu.Jayaweera@peelhunt.com, Oyvind.Bjerke@peelhunt.com
FYJun 21 revenues have come in 4% ahead of our forecasts at £58.1m and we adjust FYJun21 adj. PBT 6% upwards to £13.5m. We hike FY22 revs and adj. PBT by 2%. FY21 revenue growth of 23% (organic) is the strongest since 2016 and a marked hike from last year’s CV19 impacted 12%. The consistently remarkable figure is monthly ARPC, which has risen 16% yoy to £1,251. As DOTD continues to add functionality we believe that figure will head towards £2,000 over the coming years – that’s an awful lot of upside and goes a long way to explaining the value the market places on the stock. Bigger picture, marketing automation is one of the highest ROI ways of playing digital transformation. This is the heart of e-commerce-enabling tools and DOTD surely has at least 5-10 years mid-teens growth ahead of it.
We have often made the point that DOTD should see accelerating growth on the back of new functionality and international expansion. H1 organic revenue growth of 22% (compared to a steady c.15% pre-CV19) is a strong validation of our thesis and is indicative of secular trends rather than a pandemic bounce back. We note strong growth in SMS (notably driving c. 25% revs growth in the UK), strong international and partner growth (27% and 20% resp.), enhanced functionality growth (20%) and, bringing it all together, ARPC growth (20%). Many of these growth areas are in their infancy and offer a significant growth runway ahead.
1H21 results: no changes to estimates Following the update in January, the interim results confirm FY21 guidance is unchanged. We make no changes to our estimates. Our PBT is slightly above consensus at the moment but the implied 2H doesn’t seem too challenging at this point in time. With revenue growth of 22% in 1H thanks to strong performances across all of its regions and strategic partnerships, dotdigital has set itself up well. With the investments it has made starting to come through, there is likely to be risk to the upside balanced with costs starting to creep back in again as regions around the world open up and it continues to hire. James.Lockyer@peelhunt.com, Damindu.Jayaweera@peelhunt.com, Oyvind.Bjerke@peelhunt.com
In a repeat of the pattern of 1H20, dotdigital’s strong 1H21 to December substantially derisks the achievement of unchanged FY profit expectations, and allows room for increased investment after we tickle FY21 revenue forecasts up 2%. As we noted in our “Treble 20” note at the time of the January trading update, all key revenue stats grew by at least 20% compared with the pre-COVID 1H to December 2019, suggesting very strong momentum in each of the pillars of growth (territory, product and partners) – the aim to generate more revenue, from more customers using more communication channels, in more territories, and through more partners. 22% organic group revenue growth derived from average revenue per customer growth of 20%; additional functionality revenue growth of 20%; international revenue growth of 27%, and allows additional investment in growth in 2H21 and beyond. EMEA (incl. UK), generated significant growth of 21% (1H20: 11%) from increased SMS messaging as a further channel, reducing group gross margin to a still strong 82% (1H20: 94%). EBITDA of £10.5m from revenue of £28.2m led to free cash generation of £3.2m (1H21: £3.1m), with DOTD cashflow seasonally stronger in 2H. The net cash balance of £27.6m (FY21E: £30.3m) leaves all strategic opportunities open to the group. Target 200p (185p).
An H1 trading update to December confirms a strong start to FY21, with sales growth accelerating to 22% y/y – a material rebound from a Covid impacted 2H20 (+9% y/y) and +15% achieved prior to this. KPI‘s are strong across the piece, for instance every Geo grew >20%, Connector revenue grew +20% (Shopify: +115%) and ‘enhanced functionality‘ revs grew +20% also. It‘s genuinely hard to find fault with this performance. To us, this evidences how DOTD is executing on its strategy (around products, partners and Geo‘s) while also benefitting from strong thematic tailwinds benefitting its sector and end-markets. We leave recently upgraded FY21 forecasts unchanged, though note the strong H1 sales performance now requires an undemanding +14% y/y growth to hit N+1 estimates, so see upgrade/ outperformance potential. As well as DOTD‘s clear organic growth opportunities, we also highlight how cash continues to accumulate (now £27.6m) and could be deployed in a number of vectors.
H121: another solid performance Adjusted EBITDA/PBT expected to be in line with market expectations. We upgrade our FY21 revenue and costs as it continues to invest, our EPS ends up 3% higher (in line with consensus), and we introduce FY23. H121 saw 22% organic growth, 20% growth in functionality revenues, and a majority of growth from SMS. dotdigital is generally H2-weighted, hence the £28.2m revenue for H121 implies there could be a risk to the upside. As a pick and shovel in the ecommerce and CRM space, we continue to believe there is more to come in this digitally accelerating world. We upgrade our target price from 165p to 188p. James.Lockyer@peelhunt.com, Damindu.Jayaweera@peelhunt.com, Oyvind.Bjerke@peelhunt.com
Strong trading has continued through October and we raise FY21 revs forecasts by 6% to £56m. With much of the upside from lower margin SMS, we leave profits forecasts unchanged. H2FY20 revenue growth was impacted by the pandemic and dropped to 9% after 2.5 years of 15% growth. Our new FY21 forecast imply a return to c. 18% growth as dotdigital makes a strong recovery and benefits from the shift to omnichannel online marketing driven by booming e-commerce. FY20 growth was strongly assisted by International revenues up 19% and Functionality up 16% and yet there is still plenty of room for growth here with the former just 31%/revs and the latter just 30%. We see a significant and extended growth runway leading to consistent progress for the company over the foreseeable future.
DOTD has reported prelims to the period ending June 2020, only a month after the strong October trading update, which had already resulted in a 6% revenue upgrade. On the back of FY20 outperformance we once again push revenue up FY21 expectations (+5%, to a total of +11% upgrade) with unchanged EBITDA as the group continues to invest in product development in anticipation of further revenue growth. Success in investment is evident in each of the three pillars for growth, with advances in territorial reach and product functionality manifesting in greater sales, both direct and pre-integrated into CRM and e-commerce platforms. With a heavyweight balance sheet including £25m cash, revenue upgrades with EBITDA maintained demonstrate an expansion in investment (opex and capex) to drive greater revenue growth into FY22 and beyond, particularly internationally and in functionality: DOTD is both succeeding now and investing in its future. Target 170p reiterated as the group creates a growth platform for future upgrades.
Positive update today, reporting that trading in FYJun21 has begun well. As a result – and also thanks to DOTD’s strong revenue visibility – revenue guidance is already being upgraded. Consequently, we lift FY21E sales by 6% to £53.0m, so now expecting +12% y/y growth. To put this into context, growth fell to +9% in 2H20. We find this rapid recovery to more typical growth levels highly encouraging. Guidance for profit and cash is reiterated, meaning we leave both profit and cash forecasts unchanged. Somewhat obviously, this requires us increasing our cost assumptions….and if these don’t fully materialise, provides upside risk. Cash continues to build, now £27.7m as at Q1 – we might expect this to be strategically deployed, to enhance what is impressively consistent organic growth.
H220 revs grew 9% yoy vs. N1S estimated 6%. This resilience drove FY20 EBITDA c. 7% ahead of our forecasts. We note especially a pick-up in connector revenues (47%/sales) to growth of some 16% in H2 from 4% in H1 and believe this relates to new hires and strategy driving success across all partners, notably Shopify and Magento. We re-introduce FY21 forecasts at the lower end of the range of probable outcomes meaning we would expect upgrades rather than downgrades from this level.
Today’s update is a positive one and acts as a reminder of DOTD’s solid and recurring business model. Such visibility, combined with excellent profitability (30% AOP margin) and strong cash resources (£22.6m net) means the company is strongly placed for a challenging macro environment, and worthy of attention in view of indiscriminate SP weakness. At a time, when many companies are seeing sales fall, DOTD has today revealed that demand continues to grow – evidencing DOTD’s secular growth drivers and omnichannel opportunity. New business is however taking longer to convert, as events and businesses have seen disruption. Offset against this, retention has improved, as customers’ digital transformation plans have slowed. Related to this, we also highlight that key customer risk is very low, as no customer represents >1.5%/sales, furthermore sector exposure is diversified. In view of today’s update, we therefore reduce FY20E sales by £2m to £46.8m, but flag that this still implies 6% growth in H2. DOTD has meanwhile identified savings (by reallocating its marketing budget) such that FY20E profit remains unchanged. Notwithstanding the company’s solid (90% recurring) business model, we view it conservative to withdraw FY21&22 estimates, given the potential for prolonged disruption. Despite this, much confidence can be taken from the company’s strong financial profile and growth opportunities, which (we view) will be unaffected longer term.
dotDigital (DOTD): Corp | Iofina (IOF): Corp
DotDigital Group PLC Iofina plc
H120 numbers show continued 15% organic revenue growth with a slight shift in the mix to direct sales from connectors and the continued themes of strong (33%) International growth, strong growth in new Functionality and rising (+14%) ARPU. At present just about 20% of group sales come from clients using more than one communications channel, giving dotDigital a considerable omni-channel cross-sell opportunity.
dotDigital (DOTD): Corp Confidence, and investment in growth | InnovaDerma (IDP): Corp Interims – strong H1 offsets challenging macro backdrop
DotDigital Group PLC InnovaDerma PLC
Interims to December 2019 reveal performance in line with the January trading update: EBITDA of £9.3m was delivered from revenue of £23.1m, comfortably achieving 47% and 53% of FY expectations respectively (1H19: 47% and 41%). We review expectations towards consensus, reflecting confident additional investment in 2H20 and FY21. The three strategic pillars (geographic expansion, strategic partnerships, product innovation) demonstrate opportunities for growth, while £22.6m cash maintains potential through the options of investment, R&D and M&A. Strong KPIs abound: 90% recurring revenue; international revenue growth of 33%; 4% strategic partner revenue growth but 16% Magento-derived revenue growth; ARPU growth of 14%; EBITDA (post IFRS16) growth of 40% and margin of 40%; and operating cash generation of 72% of adjusted PBT. We adjust forecasts to accommodate additional investment, against unchanged revenue forecasts (15% growth), reducing adj EBIT 3% FY20 and 6% FY21 (adj dil EPS -4% and -5%), and reflecting board confidence in growth through new hires, while the omnichannel Engagement Cloud enjoyed levels of emails and messaging at +30% versus the immediate GDPR aftermath. 12-month target price of 140p (135p).
dotdigital’s trading update to December reveals sales and adj. PBT growth in line with N+1 (and consensus) forecasts, while period-end net-cash of £22.5m infers >100% cash conversion. The company’s growth drivers remain consistent: geographical and ARPU expansion – here we flag 18% and 51% US and APAC growth respectively, meanwhile ARPU expanded 14% to £999/user/month. We expect ARPU to improve further, as more customers use the omnichannel functionality offered within the Engagement Cloud. Equally, international expansion should also remain a core theme, as here, DOTD’s low level of penetration in sizable markets provides a multiyear growth opportunity in our view. No changes to forecasts.
dotDigital (DOTD): Corp Interim trading update | Elecosoft (ELCO): Corp FY 2019 earnings on track for growth forecast | eve Sleep (EVE): Corp FY19 pre-close; EBITDA loss/cash burn materially reduced | Hardide (HDD): Corp Placing proceeds to further upgrade equipment | LPA Group (LPA): Corp LED lighting contract win and trading update
DOTD ELCO HDD LPA EVE
Final results to June indicate performance in line with expectations, with EBITDA of £14.7m (£15.0mE) delivered from revenue of £42.5m (£42.5mE) leading to adj. dil. EPS of 3.9p (3.4pE, outperformance due to a lower tax charge) and free cash flow of £6.2m (£6.3mE). In a post-GDPR, pre-Brexit world, DOTD has simply got on with the job, driving increased ARPU of £966 (FY18: £845) from more customers taking more products in more territories, with a greater number of channels and partners. This has led to 15% organic growth from continuing operations with 86% recurring revenue (90% contracted) – with the strong visibility supported by a hearty balance sheet including £19.3m net cash, giving DOTD strategic opportunities to add to its existing operational strength. There are few companies we can point to which consistently deliver 15% organic growth, PBT margins over 25%, and reliable cash conversion (>80% op cash/EBITDA). Target 135p reiterated.
dotdigital’s final results contain no surprises, having been largely flagged at the trading update in July. The group continues to deliver high quality growth, with good progress being made across each of its strategic pillars. Group organic revenue growth from continuing operations of 15% was driven by growth in all geographic regions, with new product functionality continuing to drive increased revenue from existing customers. Further strong execution is expected and we are making no major changes to our forecasts. With net cash balances forecast to rise quickly from here, we believe the group has strong opportunities for both organic and acquisitive growth, offering multiple avenues for future value creation.
dotDigital (DOTD): Corp Prelims to June – building on the pillars | LiDCO (LID): Corp Interims – no change to forecasts
DotDigital Group PLC LiDCO Group Plc
dotdigital is a market leading SaaS provider to the digital marketing industry, delivering omnichannel communication automation to digital marketing professionals worldwide. Since the original product launch of dotmailer (2002), dotdigital has continued to innovate and develop its platform from an email only solution to a data driven omnichannel marketing automation platform, empowering organisations of all sizes to engage with their end-clients with ease. Furthermore, dotdigital drives ongoing engagement with its own customers, through the delivery of customer-led product developments to the core Engagement Cloud platform, displayed in its large and loyal customer base. We have taken a deep dive into the evolution of dotdigital, and the competitive positioning within the marketing automation industry. Against the backdrop of a diverse and congested market, we believe dotdigital offers a holistic and innovative solution, applicable across the whole market, with the potential to become a dominant global player.
DOTDIGITAL^ (DOTD, NR, CNP) - Trading Update. Organic up c.15%, Adjusted EBITDA slightly ahead of market expectations. Momentum has continued into the new financial year. | GETBUSY^ (GETB) – H1 2019. 19% recurring revenue growth, adjusted loss before tax improvement of 42% to £(284)k. 2019 guided to be ahead of current market expectations. | SEEING MACHINES^ (SEE, NR, CNP) - Automotive Design Win Targeting Euro NCAP, expected to deliver incremental revenue between A$11m and A$30m. | IQE^ (IQE, NR, CNP) - Wireless qualification update - new qualifications for Asian supply chains. | GRESHAM TECHNOLOGIES^ (GHT, NR, CNP) – H1 FY19. Group revenues up 36% to £12.4m, adjusted EBITDA up 525% to £2.5m, “Excellent” start to net fiscal year, US pipeline has accelerated. | CYANCONNODE^ (CYAN, NR, CNP) - Investor Conference Call.
DOTD SEE IQE GHT CYAN GETB
dotdigital’s FY’19 trading statement confirms another year of strong performance, with adj. EBITDA from continuing operations expected to be slightly ahead of expectations. The group continues to execute on all areas of its growth strategy (product innovation, strategic partnerships and geographic expansion), resulting in 15% organic revenue growth in the year, with continued excellent cash generation. We have updated our forecasts for the full year performance and stripped out the discontinued non-core Comapi SMS business (as announced in May’19). dotdigital remains a core holding in the sector, delivering double digit top line growth, a leading margin profile and 18% EBITDA CAGR over our forecast period. With a strong balance sheet providing scope for additional returns to shareholders, we believe the shares remain attractive.
dotDigital (DOTD): Corp FY trading update | DX (DX): Corp Major milestone reached and cleared | PCI Pal (PCIP): Corp Trading update highlights exceptional growth in FY 2019 | Quixant (QXT): Corp H1 in line with expectations and on track for FY
DOTD NXQ PCIP DX/
dotdigital has announced that it has successfully completed the integration of the Comapi CPaaS technology into its Engagement Cloud platform. This was the primary objective of the Comapi acquisition (completed in Nov ’17), allowing the group to accelerate its Omnichannel Engagement Cloud strategy. With the technology now integrated, management has decided to wind down activity in Comapi’s non-core SMS business, allowing the group to focus on high margin, contracted SaaS revenues going forwards. The decision is expected to be net cash flow positive, providing additional resources for the group to invest in further profitable growth. We believe today’s announcement is another example of the strong operational execution which dotdigital has consistently shown over the years, giving us further confidence in continued strong performance in the current year and beyond.
dotDigital (DOTD): Corp Completion of Comapi integration | Omega Diagnostics (ODX): Corp £0.6m funding to support working capital needs
DotDigital Group PLC Cambridge Nutritional Sciences PLC
We attended dotdigital’s impressive annual Summit earlier this week, alongside over 1,200 of the group’s partners and customers. The event was a showcase for the power and functionality of the group’s Engagement Cloud, with several new features launched during the event. dotdigital has an excellent track record of adding new functionality to the platform and driving additional revenue from its user base as these features are adopted. Functional recurring revenue from product innovation now makes up c.28% of Engagement Cloud revenue (H1’19: £5.7m, +50% vs H1’18). We believe the latest round of feature releases are set to continue the strong growth trend going forwards, underpinning our growth expectations for the current year and beyond.
In the first full six-month period since GDPR, DOTD has demonstrated that the Engagement Cloud platform continues to generate robust growth, through yet greater data integration and customer empowering insights. 33% headline growth from three strategic pillars included 15% organic revenue growth: pillar one, revenue from sales of additional functionality, grew 50%; pillar two, sales via strategic partners, grew 43% to constitute 41% of group revenue; and pillar three, international revenue, achieved growth of 40%. While Comapi suffered from UK retail exposure, the technology integration is well underway, leading to global opportunity from a fully omni-channel platform with broader functionality. With net cash of £16.7m at December 31st, the board has the benefit of balance sheet strength to consider all strategic opportunities. 12-month target 135p reiterated.
Interim results confirmed strong delivery against the group’s three core strategic objectives as highlighted in the trading update in January. International growth remains rapid as dotdigital continues to diversify its revenue streams across geographies. Additional investment into functionality drove incremental gains in ARPU (+16% y/y), with the extension of the group’s Magento partnership enhancing Engagement Cloud’s position as a leading marketing engagement solution. Valuation at 13.5x cal’19 EBITDA looks undemanding against forecast strong growth, with management confident of meeting FY’19 expectations.
Armadale Capital (ACP): Corp Project Update | dotDigital (DOTD): Corp Robust interims | HML Holdings (HMLH): Corp London acquisition | Pelatro (PTRO): Corp Vietnam revenue share contract underpins forecasts
DOTD HMLH TRT PTRO M1Q1
dotdigital has announced the extension of its key technology partnership with Magento, an Adobe company and marketing leading e-commerce platform, for a further three years. We view this as testament to the attractions of the Engagement Cloud platform, its reputation as a market-leading omnichannel marketing proposition, and the company’s commitment to deepening its strategic partner relationships. We make no changes to our existing forecasts, but continue to expect strong top-line growth to be delivered from Channel Partnerships (+43% in H1 19) as well as from international sources (US +30%; APAC +80% in H1 19). In our view, the current valuation (FY19 EV/EBITDA of 14.1x) represents a compelling entry point given anticipated growth in revenue and profitability.
dotdigital Group issued an H1 trading update showing continued strong growth in its three core strategic pillars, with some softness in its Comapi operations principally due to retail sector weakness. Profitability remains in-line, and cash generation actually outperformed our expectations (£16.6m; N+1: £15.3m). We move FY19 and FY20 revenue forecasts lower, but our EBITDA forecasts remain broadly unchanged and is now in-line with consensus. Valuation remains undemanding at 13.7x EV/EBITDA, falling to 11.7x next year.
dotDigital (DOTD): Corp Interim trading update | Ideagen (IDEA): Corp Low risk and high activity in risk management | Velocity Composites (VEL): Corp Full-year results | ZOO Digital (ZOO): Corp Trading update
DOTD IDEA VEL ZOO
dotdigital has delivered another year of strong growth, with a positive outlook promising more of the same in the current year. The results, which were largely flagged at the trading update in July, show 15% organic revenue growth, with 22% EBITDA growth and net cash of £15m at the period end. Double digit growth was delivered in all geographies, with an 18% increase in ARPU signalling continued progress with both new and existing customers. With further strong execution expected we are leaving our top of the range forecasts unchanged. The shares trade on a Dec’19 EV/EBITDA of just 12.9x, which we believe is highly attractive for a core holding in the sector and see recent share price weakness as an opportunity.
The successful formula of selling more functionality, to more customers, through more partners, in more territories, over more communications channels continued in FY18. Much more than an email marketing platform, the acquisition of Comapi during the year confirms dotmailer as a data-led marketing platform across clients’ channels of choice (e.g. email, WhatsApp, SMS, Facebook Messenger), leading to greater revenue per client from additional services, including analytics. Prelims are in line with the trading update, showing a 26% increase in new client wins, and continuing momentum from the existing client base – even during the imposition of GDPR – leading to 35% revenue growth (15% organic) and 85% (FY17: 81%) recurring revenue. Forecasts continue to expect strong growth into FY19, and maiden FY20 forecasts show continuing trends in growth and margin. Unmodelled upside persists from the increasing use of AI to further assist targeted client marketing, tailored to the interests of individually profiled end users. Target lifted to 135p (115p): performance in FY18 proved the robust nature of the model even in a year of uncertain external influences.
dotDigital (DOTD): Corp Winning formula | Netcall (NET): Corp Contagious excitement in Low Code
DotDigital Group PLC Netcall plc
dotDigital has delivered interims to December in line with the January trading update and unchanged EBITDA/adj PBT expectations. The three strategic pillars for growth continue to prove highly effective, delivering 25% revenue growth including 17% organic revenue growth, complemented this year by the Comapi acquisition in November. Geographic expansion, increasing numbers of strong partnerships, and product innovation continue to drive the strong growth as the group excels at current operations and demonstrates the strength of its path to become an omni-channel dataled customer behaviour and analysis platform. Target 115p reiterated.
The group’s interim results (largely preannounced in trading update) showed 17% organic sales growth, 8% EBITDA growth and 14% EPS growth. Progress was made in growing international revenues (25% of sales) and broadening partnerships (sales +35% y-o-y). The integration of Comapi is on track and furthering the group’s omnichannel offering. We have made no changes to forecasts and believe the cal’18 EV/EBITDA rating of 18.1x is supported by our EPS growth forecast of 26% and 29% in FY’18 and FY’19. Organic and acquisitive opportunities remain healthy and we believe the group can execute well against these.
dotdigital announced the appointment of Paraag Amin as the new group CFO, replacing Phillip Blundell, interim CFO. Paraag has over 15 years’ experience working as an analyst, Fund Manager and working with public markets with previously held positions with Canaccord Genuity, Peel Hunt, Credit Suisse and Goldman Sachs. He will be overseeing the finance and legal department and assisting the group with the continuation of the successful strategy in growing the business. The group’s interim results will be reported on 27 Feb. A recent trading statement confirmed performance is in line with expectations.
dotdigital issued an in-line trading update indicating revenues for the six months to 31 Dec 2017 will be £18.8m, up 25% y-o-y and EBITDA is also in line with management expectations. Revenue showed 17% organic growth (similar to growth achieved in H1’17), with Comapi contributing £1.3m. The group has shown continued progress in a number of strategic fronts – geographical expansion, increasing revenues and deepening relationships with more strategic partners and the broadening of its product platform. We have made no changes to forecasts with interim results out on 27 Feb 2018. We expect the current fiscal year to be another year of strong progress for the group.
dotdigital Group (DOTD LN) In line trading update | Harwood Wealth (HW LN) FY17 adj. EBITDA 8% ahead, strong growth in KPIs | Marston’s (MARS LN) Mixed start to the year | N Brown Group (BWNG LN) Growth over peak, with promos offset by FS margin+ cost improvements
DOTD HW/ MARS NBRNF
Dotdigital issued an AGM statement indicating the positive momentum it saw at the time of the prelims continued into the new fiscal year. International growth and its relationship with partners were key drivers. In addition, the integration of the Comapi acquisition is on track. Comapi has also recently won a significant contract which helps to underpin its forecasts. Dotdigital remains well placed and looks well placed to deliver another year of strong progress.
dotdigital announced the acquisition of Comapi, an omni-channel messaging and cloud communications provider, for £11m in cash to be funded through its existing cash reserves. The deal extends the group’s omni-channel marketing capability and opens the door to attractive cross-selling opportunities. We upgraded our FY’18 EPS by 5% (7-month contribution) and FY’19 EPS by 14%. We see the shares as a core holding in the sector, offering visible growth in a structurally attractive market.
With its exposure to a structural growth market, a highly recurring business model, consistent strong execution, healthy balance sheet and potential new avenues for growth, we believe dotdigital remains a core holding in the sector. It offers investors an attractive compounding growth stock with the potential for accelerated growth as it expands internationally and increasing prospects for M&A. The FY results (19% sales growth, 27% EBITDA growth and 32% EPS growth) showed another year of strong execution, with the H2 growth acceleration particularly pleasing. We remain confident of the group’s prospects.
Strong results from text book execution derive from delivery of the three strategic routes to growth: more partners, doubling the addressable market; increasing reach of successful operational territories, delivering 48% revenue growth outside the UK; and broader product functionality – leading to +24% spend per customer, from a growing stable of c4,000 active customers. FY17 revenue is in line with expectations, while EBITDA of £10.2m (vs £9.7mE) is 5% ahead; adj EPS is 9% ahead. Cash of £20.4m (£19.3mE) highlights 2H free cash flow of 108% of adjusted PBT, and a balance sheet with options open for further growth – increased investment through opex and capex; a well-covered dividend; and potential M&A to accelerate product development, or enhance organic growth in new territories through acquiring local presence. We lift our 12-month target price to 92p (80p), in line with the Megabuyte accounting and enterprise software peer group.
Anpario (ANP LN) Strategic initiatives paying off | dotdigital Group (DOTD LN) H2 growth acceleration; M&A in focus | Itaconix (ITX LN) Growing commercial interest prompts partner’s plant investment | RhythmOne (RTHM LN) H1 Trading update
DOTD ITX ANP RTHM
dotdigital expects to deliver 19% organic revenue growth with total FY’17 revenues of £32.0m, in line with forecast whilst EBITDA is also expected to be in line (we forecast £10.1m and an EBITDA margin of 31.6%). Cash of £20.4m was nearly £1m better than our estimate. The group saw an acceleration of growth in H2 vs. H1. UK grew by 15% in H2’17 vs. 8% in H1’17 and the US also grew by 22% in H2’17 vs. 11% in H1’17. Changes made in leadership and approach in a number of the regions to maximise performance has clearly paid off. The group looks to be in a strong place organically and is continuing to look at earnings enhancing opportunities that could add to its platform capabilities. We believe the group is one of the best “compounding” stocks in the market, with over 80% recurring revenues, high levels of profitability and cash generation and an attractive end market seeing structural growth.
In this note we explore the marketing technology (MarTech) landscape, which has evolved rapidly in recent years and become increasingly complex. We believe MarTech offers interesting opportunities for investors given the size of the market and its rapid growth. Corporate investment in marketing technologies has been fuelled by an explosion in digital content consumption, resulting from growth in digital channels, increased internet penetration, smartphone adoption and new content distribution models. This has presented significant data-driven challenges for marketers, who have been forced to invest in new technologies to help them deal with these challenges and market more effectively. We examine some of the key trends in the market and highlight a select list of technology providers that we believe warrant investor attention. These are ATTRAQT Group, Cxense ASA, dotdigital Group, First Derivatives, mporium Group and SDL.
DOTD MPM ATQT FDP CXENSE RWS
dotdigital delivered another good performance with H1’17 results showing 17% growth in revenues and 29% growth in PBT. Average monthly spend was up 24% as the group continues to move to the mid-market. We have made no changes to forecasts. Investments are being made to broaden its sources of growth both from a geographical and platform integration perspective. Additionally, the group flagged it is looking more closely at acquisitions that could accelerate its strategy. We believe the group remains well-placed to create further value with 81% recurring revenue, 3-yr EBITDA CAGR of 22%, £19m of net cash on the balance sheet, a positive demand environment and a track record of delivery.
dotDigital has delivered interims to December in line with unchanged expectations, and no change to forecasts. Prospects remain promising across each growth driving opportunity – enhancing the recurring revenue per customer, from greater customer numbers through both increased numbers of channels and partnerships, and also increasing the number of territories in which dotmailer focuses. The completed reorganisation of the UK sales team, and the pick-up in US activity in response to the release of Magento 2.1, have restored momentum into 2H, demonstrating effective management action where opportunities for improvement are identified. Target 70p reiterated.
GBGI—Schedule One update from integrated provider of international benefits insurance. Raising £32m at 150p. Admission expected tomorrow. Anglo African Oil & Gas— Admission expected early March. Acquiring stake in producing near offshore field in the Republic of the Congo. Saffron Energy—Schedule One update. Raising £2.5m, expected Mkt Cap £7.7m. Admission due 24 Feb. Italian Oil & Gas Play Guinness Oil & Gas Exploration—Publication of prospectus. Seeking to raise £50m and invest in 15 exploration companies at launch, with plans to grow the portfolio to 30 positions during its lifetime. Issue closing 23 Feb.
DOTD ARTA IGE ARBB UTW AIEA GHE LEND OTC
dotDigital delivered another year of strong growth, profitability and cash generation. All key financial metrics grew in double-digit terms (all organic) driven by growth in customers, growth in average spend and an increasing contribution from international. The Board is proposing a 19% increase in the ordinary dividend and a 0.41p special dividend. Our profit forecasts in 2017 and 2018 are unchanged, with EBITDA growth of 26% and 22%. dotDigital’s prospects remain healthy with new avenues of growth being developed through wider partnerships and broadening international reach. With the vast majority of revenues relating to monthly subscription revenues and a diverse customer base (biggest client accounts for c.1.5% of sales), the stock offers one of the most secure strong organic growth stories in the market.
Prelims delivered EBITDA of £8.0m (comfortably ahead of £7.6mE) from revenue of £26.9m (£27.5mE), with cash very strong at £17.3m (£15.3mE), as detailed at the July trading update. Consistently strong revenue growth included 21% in the established UK market (20% of 2H16 revenue) and 58% across the rest of the world (including 43% constant currency growth in the US). Geographical expansion, product innovation and strategic partnerships continue to be well executed, supported by a strong balance sheet that is also able to accommodate a growing dividend, and an FY16 special dividend given strong cash generation. With EBITDA and cash performance ahead of expectations and board confidence displayed in the dividend, forecasts remain primed for upgrade: target price 70p (55p).
The interim results revealed 29% growth in revenue, a 30% growth in profitability and a better than expected net cash position of £14.8m. Our 12-month target price of 55p is based on 2018 EV/EBITDA of 12x, which we view as justified by the high growth potential both in the UK and internationally, and the unusually high revenue visibility.
Dotdigital’s interims have once again showed strong growth in revenues, profit and cash driven by big improvements in key performance metrics. The profit performance was also helped by some delayed investments in sales and marketing which has the effect of driving a 4% EPS upgrade in FY’16 but a 7% downgrade in FY’17 (not enough time for investments to deliver a return) and cash upgrades for both years. Over the next 3 years, we expect DOTD to deliver a Sales CAGR of 25% and EBITDA CAGR of 22% given its strong offering and a highly favourable demand environment. The outlook remains bright and we are confident of the group’s prospects.
dotDigital*: Strong interim results (CORP) | Netcall*: Interims – evolution taking shape (CORP) | Atalaya Mining: Analyst interview (BUY)
DOTD NET ATYM
Dotdigital, announced that Simone Barratt, CEO, has undergone surgery in early January which has been successful. Whilst she remains involved in the business and will continue to participate remotely as she recovers, she and the Board have felt it prudent to put in place a revised interim and on-site leadership structure for this 6 month period. Milan Patel, CFO, steps into an Interim CEO and CFO role, to be supported by the COO and CTO. Previous CEO and current Non-Executive Director, Peter Simmonds will also be returning one day a week. The group has recently appointed a new sales-focussed leader in the US whilst Founder Tink Taylor will support Rohan Lock in building out its APAC business. We are confident about the depth of management at Dotdigital and believe it will continue to execute against their significant opportunities.
Dotdigital, one of our key picks of the year, issued a strong trading update for the six months to 31 Dec 2015. Revenue grew by 29% (organic) and period end cash of £14.8m (£11.9m at 30 Jun 2015 and £9.5m at 31 Dec 2014) imply another period of strong profitability and cash generation. Key performance metrics remain impressive and leave us confident of its growth prospects.
dotdigital (DOTD.L): H1 update | XLMedia (XLM.L): Positive FY pre-close | Shanta Gold (SHG.L) : Q415 update
DOTD SAAGF XLMDF
Charlemagne Capital Ltd (CCAP LN) FuM +2% in Q4, reduced FY15e loss forecast | Dotdigital Group (DOTD LN) Positive trading update | MySale Group (MYSL LN) Trading momentum building as self-help and growth registers | Quantum Pharma (QP LN) Delays to new product approvals prompts resetting of expectations | ScS Group (SCS LN) Strong trading vs tough comps means significant upgrades today | Wilmington Group (WIL LN) Filling in the service gaps – Insight gains pharma training
DOTD MYSL QP/ SCS WIL CCAP
Dotdigital operates in a market enjoying strong structural growth as companies shift marketing spending towards digital channels. The group is Magento’s first and only global Platinum partner for email and multichannel marketing, such is the strength of its technology platform. We believe it is gaining market share as it makes inroads in international markets and believe revenues outside the UK (c.15%) can grow to the same size as those in its home market. The track record of growth, profitability and cash conversion is exceptional and we view this as a core holding in the sector.
Magento, one of the leading global ecommerce technology businesses in the world, announced a new platinum level to its Partner Program. Magento has only selected two initial Platinum partners - PayPal and Dotdigital - to address two key strategic merchant concerns, payments and marketing, respectively. This makes Dotdigital the first and only email and multi-channel platform in the world to achieve this status and is a significant endorsement of its capability. Magento has 240,000 customers and this powerful endorsement will be helpful not only in that context but also in terms of the enhanced profile it provides given Dotdigital’s international growth ambitions.
Renold: Interim results – self-help continues to boost margins (BUY) | dotDigital*: New partner status (CORP)
DotDigital Group PLC Renold plc
Dotdigital Group (DOTD LN) Magento’s only global platinum marketing partner | Eckoh (ECK LN) In-line; Accretive deal supporting growth strategy | IFG Group (IFP LN) In-line, positive KPIs, Capita/Towry transactions complete | Informa (INF LN) Trading update | ScS Group (SCS LN) Risk is to upside given positive trading and operational gearing | Summit Therapeutics (SUMM LN) Extension of strategic alliance with the University of Oxford
DOTD IFP INF SCS SMMT TZ5A
Another M&A data point in the digital marketing space as Endurance International announces it is acquiring Constant Contact for $1.1bn (23% premium). The acquisition multiple is 12x Dec 2015 EBITDA, with Constant Contact 2015 forecast revenue growth of 12% and forecast adjusted EBITDA margin of 20%. Dotdigital currently trades on 14x EV/EBITDA to June 2016 falling to 9.6x to June 2017, with forecast revenue growth of 30% (and track record of delivering this) and adjusted EBITDA margin of 27% even as it invests in its international growth. We believe the group has exciting growth opportunities ahead and that its organic performance together with the backdrop of a consolidating global industry will be highly supportive of the shares.
The group has once again produced a strong set of results with profitability up 44% YoY, 9% ahead of the finnCap forecast. Cash generation remains strong and our two-year forecast profit growth of 63% remains unchanged. We raise our target price to 45p.
Dotdigital’s FY 2015 results show another period of strong execution of its growth strategy. EBITDA and FD EPS were up significantly and were 6-7% ahead of expectations. This was a pure organic performance and was achieved whilst the group continued to invest in both technology and people to continue delivering significant growth in the UK and international markets. It was also a period where both the plc and operational boards have evolved to ensure the group has the requisite skills for its next phase of growth. The performance and trajectory suggest that the group remains strongly placed to deliver further growth in the coming periods.
dotDigital*: Strong final results; target price raised (CORP) | Weatherly International*: Quarterly operations update (CORP) | LiDCO*: US purchasing agreement for 38 hospitals (CORP) | LiDCO*: Interims in line (CORP) | Staffline: Prospects strengthened (BUY) | Proactis*: Growth and potential (CORP)
DOTD STAF PHD LDRUF WTI
dotDigital has released a trading update for the year to June 2015. The group’s strong organic growth has continued, delivering 31.5% revenue growth in the year to £21.3m with both the UK and International businesses performing well. EBITDA is expected to come in slightly ahead of expectations as the increased investment in FY’14 starts to deliver returns. We believe dotDigital’s track record of profitable, cash generative growth is highly attractive and expect this strong performance to continue.
